Economics, Econometrics and Finance
2 years ago

New NPV formula reveals hidden safety margins in investment decisions!

Journal of Applied Corporate Finance
Uncertainty in Capital Budgeting: Five Particular Safety‐(or Danger‐) Margins from the NPV Formula
Richard A. Miller

Paper Summary

The article discusses how to evaluate potential investments using the net present value (NPV) formula. It introduces new insights like normal profit, economic payback period, and maximum investment cost. These can help calculate safety margins for investment decisions.

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